• Accor suffers sharp Q1 sales fall

Despite the resistance of economy hotels in France and Germany, Accor's first quarter sales figures were described by CFO Jacques Stern as "far worse than the fourth quarter".

The first quarter 8.7% drop in like-for-like sales compares to the 2.8% reduction in the fourth quarter.

Stern promised to cut maintenance capex by Eu175m over the next couple of years. In February, at the full-year results, it was announced that maintenance capex was being cut from Eu515m in 2008 to Eu365m in 2009. Now, less than two months later, this is being cut further to Eu315m.

The biggest renovation cost cuts are coming at midscale and upscale hotels. The renewal of the F1 brand is to continue as this was still delivering a positive return on investment.

In addition to maintenance capex cuts, the Eu100m planned for cost savings in general expenses is to be stepped-up by an as yet unspecified amount.

During a conference call with analysts, Stern said: "My gut feeling is that the trend is not worsening but also not improving." He added that his best guess was that the second quarter will be similar to the first.

The final outcome may be better than is currently feared but Stern said it was prudent to manage Accor in a way that limited risk.

Not being cut at present is the Eu500m expansion budget and Accor is confident about adding 30,000 new rooms during this year.

Of Accor's three main markets – France, Germany and the UK – it is the UK which is performing worst, most notably in the economy hotel segment.

French and Germany economy hotels suffered a revpar fall of just 2.7% and 4.6% respectively in the first quarter. In London revpar at Accor's economy hotels was down 15.1% and in the provinces it was down 11.5%.

But some markets were suffering even worse. In Spain the market was "totally destroyed" said Stern with mid scale hotels selling rooms below economy hotels. Revpar in Accor's Spanish economy hotels was down 28.4%, a drop the company has never seen before. The revpar falls for the Netherlands and Italy for economy hotels were 18.8% and 15.9% respectively.

The economy segment is more affected than in the last downturn, admitted Stern, blaming the unprecedented drop in GDP. He said, however, that the historic revpar elasticity to GDP remained in the range 1 to 2.

For midscale and upscale hotels, London was proving more resilient than the UK provinces, down 7.0% against 16.5%. But upscale was more impacted than midscale. In France, upscale was down 13.4% compared to 10.1% drop in midscale.

There was ongoing pain in the US economy hotels with revpar down 8.1% but there was bright spot with franchising fees up 19.4%.

Separately, Accor this week raised Eu600m in a bond issue on a 6.5% coupon. It follows an issue in January for the same amount but on a coupon of 7.5%.

This will more than fund the Eu270m impact that upping Accor's stake in casino group Lucien Barriere to 49% will have. Colony Capital exercised its option to sell its 15% stake at the end of March.

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